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Sunday, October 28, 2012

The Economics of Citizenship

Citizenship is a very emotional topic. It defines one's membership in a political community and one's relationship to a nation-state. It's not surprising that people feel very strongly about it - everyone has an opinion.

I came across this paper recently while researching another topic. It's called The Economics of Citizenship and it came out of a workshop on citizenship acquisition held in Sweden in 2004. I found it interesting because most of what I have read about citizenship models comes from social scientists, folks like Patrick Weil and Peter Spiro, and focuses on issues of identity, law and globalization. The essays here take a different approach - they are an effort to apply the principles of economics to explain why migrants do or not choose to become citizens. Their analyses start with these questions:

What are the economic determinants animating an immigrant’s choice to acquire citizenship?
What are the economic consequences of choosing citizenship for the foreign-born worker?

Each essay in the paper takes these questions and then looks at the state of citizenship acquisition in a country: Canada, Sweden, The United States, The Netherlands, Norway. Africa, Asia and South America are noticeably absent here. Each essay is prefaced with a short narrative by an immigrant explaining where he/she came from, why he chose a particular destination country and why he stayed and decided to become a citizen.

Since I am not an economist, I can't vouch for the models the authors used but I did find some of their conclusions interesting. I'll let you read the paper for yourself but here are my comments on their data and conclusions:

Home Country, Host Country, and the Rest of the World: There is the original citizenship, the second citizenship and the pull of the wider world and other citizenships. Sometimes it make all kinds of sense for a migrant to move on to yet another country. Just because a migrant has come to one and become a citizen, there is nothing stopping him from packing up and moving to a Third Place. In fact it may make a lot of sense for a migrant to seek citizenship in one host country as a prelude to moving on or moving back to the home country. And many do. It's a kind of insurance that he/she can always go back to that country no matter what happens.

It can also be a stepping-stone to other countries. Becoming a Canadian means access to North America. Becoming Belgian gives access to the European Union. Becoming Spanish can ease entry into certain Latin American countries. These citizenships confer an important economic advantage (access to multiple job markets) that may have very little to do with the country where it is acquired and everything to do with access to other countries.

Dual Citizenship: There is no limit really on the number of citizenships an individual can acquire provided that all the countries involved accept dual citizenship or they don't try to enforce their own laws against it. Most countries these days do rather grudgingly allow it. No reason, for example that someone cannot be British, French, and Canadian.

Does the acceptance of dual citizenship by the home country have an important impact on the decision to acquire citizenship in that state? Clearly, it does have an impact. In the essay on Canada the model is described this way:

Both the acquisition of subsidized human capital and the prospect of receiving public goods (citizenship and a passport) now increase the probability that this immigrant will ascend to citizenship, if the expected earnings stream in country B net of costs of citizenship acquisition exceeds the option of returning home. However, if country A does not recognize dual citizenship, this will raise the cost of possible return migration and reduce the probability of ascending to citizenship in country B.

However, it doesn't seem to be a determining factor in all cases. What might cause a migrant to decide to become a citizen of another country in spite of the fact that he/she will lose his original citizenship?

The Type of Migrant: One answer is who that migrant is and where he or she came from. Refugees tend to become citizens as soon as possible and when you think about it that makes a lot of sense. Economic migrants from poorer countries also have high rates of naturalization though not as high as refugees.

But, and I found this very interesting, the migrants from relatively rich countries (OECD versus non-OECD) with good qualifications who move to another country have much lower naturalization rates.

If a German leaves Europe for the United States, the difference in living conditions, and the attractiveness of return, will be quite different compared to a Burmese refugee fleeing political persecution and economic misery in her homeland. All the chapters in this volume suggest that the citizenship calculations of migrants from highly developed countries differ from others.

This has important implications for immigration and citizenship law in developed countries competing for the small pool of highly-qualified migrants. If the intention of these states is to get those migrants to come and stay then two sets of incentives have to be designed: the first to draw them in and the second to keep them around. This means that "stapling a Green Card to a diploma" is only half the battle and even then a path to citizenship is no guarantee at all that they will remain. In fact their most judicious strategy may be to stay long enough to acquire a second citizenship in order to increase their options while looking at maximizing their economic potential by moving on to another state that likes their skills and offers interesting opportunities. As for nation-states, the editors of this paper suggest that the most successful strategy for rich countries who want skilled people who stay is to target the entrepreneurs, university graduates and skilled labor from developing countries.

The Economic Advantage: Does citizenship confer a real direct advantage in terms of increased wages and better employment opportunities? Again, it depends on the migrant. Destination country, country of origin, skill level and even gender are important variables. The essay on Canada reports:

For our general sample of employed immigrants, we detected a wage differential of 15% between citizens and non-citizens. Moreover, as shown in table 4, human capital endowments are relatively more important for males than females. In general, immigrant citizens from non-OECD countries enjoyed a greater wage advantage than non-citizens from OECD countries (28.9% vs. 9.8%)

On the other hand look at the data on employment for Swedish immigrants who become citizens:

...those immigrants who have been naturalized tended to see a modest increase in the probability of having full-time employment in 1990. Some nationalities, particularly the Scandinavians, Chileans and Germans, saw almost no difference between the naturalized and non-naturalized groups. The Czechoslovakian men saw the greatest increase in probability of almost 24 percentage points, while American men and Greek women experienced considerable negative effects of citizenship.

And for the U.S.?

...citizenship acquisition alone does not have a statistically-significant effect on the log of annual wages of developed country immigrants. however, a larger and statistically significant effect of citizenship acquisition on the log of annual wages is found in case of immigrants arriving from developing countries.

So there is an impact on wages and employment but it ranges from a negative or nearly no effect (how interesting) to a big positive. It looks like (and that makes sense) the biggest effect will consistently come when the migrant is from a developing country. It also demonstrates that migrants that move from one developing country to another are probably seeking more intangible benefits - it's much less likely that they will see a direct economic advantage to migrating in the first place much less bothering to become a citizen. This means that countries that seek to encourage migration from one developed country to another need to put the emphasis on the intangibles as they "market" their nation's advantages over the competition. Positive things like "quality of life," good government services, support for families, and safety.

These are certainly reasons to go live in another country but they don't necessarily translate to a desire to seek citizenship. They can usually be had without it. The question I have (assuming that countries are interested in having those highly-qualified migrants from developed countries become citizens as often as other classes of migrants) is this: what would developed countries have to offer to tip the scales in favor of citizenship acquisition for this class of migrant?

For an example of an interesting "offer" have a look at the Working in Sweden site. Their pitch is a combination of tangible and intangible benefits: a high standard of living, vacation, child care, pensions, universal healthcare and security. "Despite relatively little spending on prison systems and law enforcement, life in Sweden is very safe."